With skyrocketing healthcare costs, it can help to have a savings fund built to tackle future medical bills.
A Health Savings Account (HSA) lets you invest for future qualified medical expenses, while getting tax benefits.
So let’s take a look at how the Fidelity HSA holds up.
Fidelity HSA at a glance
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| Account minimum | None |
| Maintenance fees | Zero |
| Account types | Self-directed and robo-advisor |
Fidelity HSA benefits
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You can open a Fidelity HSA with no account minimum. And Fidelity doesn’t charge any annual account maintenance fees, as many other HSA providers do.
Plus, you receive triple tax benefits.
- Your contributions are tax-free
- Earnings in the account grow tax-free
- Withdraws for qualified medical expenses are tax-free
But keep in mind that any withdraws made for non-qualified expenses would trigger a 20 percent penalty on the withdraw in addition to regular income tax. The penalty would be waived if you’re age 65 or older, however.
How does the Fidelity HSA work?
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To open an HSA, you’d need to pair it with a high-deductible health plan (HDHP). Afterward, you have two types of Fidelity HSA options.
With a self-directed Fidelity HSA, you get to manage your own account and choose your own investments. Fidelity offers access to virtually the entire universe of securities including the following.
- Stocks (Including fractional shares)
- Bonds
- Exchange-traded funds (ETFs)
- Mutual funds
As a highlight, the firm also lets you invest in its zero-expense-ratio mutual funds. Expense ratios are management fees that could dig into your savings.
You can also explore the firm’s pre-selected HSA Funds to Consider list.
Additionally, you can open an HSA through Fidelity GO. This is a robo-advisor platform. After answering a few questions, the robo-advisor recommends a personalized and diversified investment portfolio for you built with zero-expense-ratio mutual funds. These funds offer exposure to different asset classes including domestic stocks, international stocks, and bonds.
The Fidelity GO HSA is automatically managed, so it can be a good option for those who don’t want to manage and pick their own investments.
But while there’s no minimum to open a Fidelity GO HSA account, you’d need at least $10 to start investing. And you should know that there’s a 0.35% annual management fee for Fidelity GO HSA accounts with balances of $25,000 or more. But this would also give you access to one-one-one, 30-minute calls with individual Fidelity advisors. These individuals can help you map out a financial plan to tackle other financial goals like retirement.
In fact, an HSA allows you to make penalty-free withdrawals for anything after reaching age 65. However, you’d still owe regular income tax on the withdrawal.
Fidelity HSA: The verdict
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The Fidelity HSA definitely stands out among the competition. Its zero account minimums and zero maintenance fees make it a top contender for low-cost HSAs. But there are some points to keep in mind like a 0.35% advisory fee on Fidelity GO HSA accounts with balances over $25,000.
How to open a Fidelity HSA account
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If you’re interested in a Fidelity HSA, follow these steps.
1. Visit its official page and click on “Open an HSA.”
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2. Choose whether you want a self-directed or Fidelity GO account.
Source: Courtesy of Javier Simon via 24/7 Wall St.
3. Select whether you’re an existing customer or new
4. Follow the prompts
Depending on the type of HSA account you’d want and whether you’re a new or existing customer, you’d need to fill out different forms.
But be sure to have the following ready.
- Social Security number
- Address
- Phone number
- Country of citizenship
You’d also need to determine your eligibility. So make sure you have important details regarding the high-deductible health plan you’d like to pair your HSA with.
Why we covered this
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Healthcare expenses can be a major burden for many people. So it’s important to have a strategy to prepare for these unexpected obstacles. HSAs can help. But not all providers deliver the same package. So it’s important to do your research. That’s why we took a deep dive into the Fidelity HSA to help you determine if it’s something you may consider.
If you want to learn more about Fidelity, check out our regularly-updated list of Fidelity Investments guides, news, and coverage.
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